China's Consumer Social Security Analysis

Recently, demand deficiency has been the key barrier in the economy development in China. Additionally, some adjusting policies have gained little effect. Recent research shows that one of the most important reasons is the imperfect social security system.We can analyze the impact of the social security on the household consumption from four aspects. That is life cycle saving, income distribution, precautionary saving, liquidity restraints. We can find that propensity of consumption is highly related to the practices of social security reform, according to the analysis on the time series data from 1981 to 2004. It shows again that social security influences household consumption which grows with social security expenditure, according to the regress analysis on the relationship between household consumption and social security expenditure with the enlarged model of life cycle hypothesis with the data of 2002.Although China's social security system has made great progress, it is far from perfect and restrained the growth of household consumption. Therefore, Chinese government should reform and improve the social security system, in order to increase the household consumption.